This chapter is from the book

The Benefits of Advanced Harmonic Trading Techniques

I have always said that Harmonic Trading and the pattern identification techniques in particular within this approach are merely a starting point. These techniques serve as a comprehensive framework that accurately measures and analyzes price action. The ultimate objective of this book attempts to outline specific technical situations within the course of trading that will yield a high degree of reward while minimizing risk. Advanced Harmonic Trading techniques can offer information regarding the potential state of price action unlike any other methodology. When combined with other technical studies and analyzed within the predominant trend, Harmonic Trading strategies can pinpoint the potential "hot spots" where reversals may complete or important continuations of the prevailing direction may develop.

The combination of pattern identification techniques and the utilization of Fibonacci ratios to quantify price action is the greatest asset within the Harmonic Trading approach. As this methodology has become more refined, I've realized that there are many other technical indicators that form repetitive patterns in the same manner as price action. In the past, I tended to be exclusive in the application of other technical measurement tools with harmonic price patterns. However, I began to notice over time how frequently many of these indicators were acting as valid confirmation signals in conjunction with the basic pattern recognition techniques. Although many of these integrative strategies are simple applications of standard indicators, the combination of these existing measures with the Harmonic Trading approach yielded more accurate technical information.

The advanced Harmonic Trading strategies offer immense confirmation signals, and they have led to more precise executions within a pattern's Potential Reversal Zone (PRZ). Essentially, the integration of other measures has resulted in even more accurate projected reversal points for trade executions and hence, more reliable technical information regarding the state of potential price action. At first, the simple integration of many of these indicator readings was generally beneficial. However, as I expanded the use of other technical indicators, I noticed many similar harmonic traits that formed in the indicator readings as did in the actual price action itself. Once I began to see these relationships, I thoroughly explored a variety of indicators to find those that correlated best with the Harmonic Trading techniques and provided the most accurate confirmation signals to validate patterns.